Monday, February 27, 2012

Bentir vs. Leanda

Facts: Respondent Leyte Gulf Traders, Inc. filed a complaint for reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction against petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. Respondent corporation alleged that it entered into a contract of lease of a parcel of land with petitioner Bentir for a period of twenty years starting May 5, 1968. According to respondent corporation, the lease was extended for another four years or until May 31, 1992. On May 5, 1989, petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormada and Charito Pormada. Respondent corporation questioned the sale alleging that it had a right of first refusal. Petitioners allege that the inadvertence of the lawyer who prepared the lease contract is not a ground for reformation. The trial court dismissed the case against petitioners. An appeal was brought to the CA which reversed RTC’s ruling. Hence this appeal. 

Issue: Whether or not reformation was justified and that such right has not prescribed 

Held: The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention of the contracting parties, an instrument already executed is allowed by law to be reformed. In the case at bar, respondent corporation had ten years from 1968, the time when the contract of lease was executed, to file an action for reformation. It did so only on May 15, 1992 or twenty-four years after the cause of action accrued, hence, its cause of action has prescribed. If the extended period of lease was expressly agreed upon by the parties, then the term should be exactly what the parties stipulated. Even if the supposed 4-year extended lease be considered as an implied new lease under Art. 1670, "the other terms of the original contract" contemplated in said provision are only those terms which are germane to the lessee's right of continued enjoyment of the property leased. The prescriptive period of ten years provided for in Art. 1144 applies by operation of law, not by the will of the parties. Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968. Even if there was no prescription, respondent corporation brought the present action for reformation after an alleged breach or violation of the contract was already committed by petitioner Bentir. Consequently, the remedy of reformation no longer lies. 

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